Final answer:
Labor productivity is primarily determined by two factors: technological change, which encompasses invention and innovation allowing for more efficient work, and economies of scale, providing cost advantages from increased production size.
Step-by-step explanation:
The keys to determining labor productivity are technological change and economies of scale. Technological change refers to the combination of invention—advances in knowledge—and innovation, which signifies the application of these advances in creating new products or services. For instance, the transistor, invented in 1947, represents a significant technological advance that has since been incorporated into countless products, thereby enhancing productivity by allowing workers to perform tasks more efficiently with smaller, powerful devices.
The concept of economies of scale plays another vital role in labor productivity, referring to the cost advantages that enterprises gain from increasing production size. An illustration of this can be seen with a Canadian worker using an industrial-size oven to produce more loaves of bread per hour compared to a U.S. worker using a residential size oven. These size-related cost benefits contribute to increased productivity.